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spk02: Welcome to the TVIC Health Systems first quarter 2024 financial results and shareholder update conference call. All participants will be in listen-only mode. Please note that the conference is being recorded. Statements made during this call contain forward-looking statements about TVIC's business. You should not place undue reliance on forward-looking statements. As these statements are based upon management's current expectations, forecasts, and assumptions, and are subject to significant risks and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue, or the negative of these terms or other words or terms of similar meaning. Risks and uncertainties that could cause TIVX actual results to differ materially from those set forth in any forward-looking statements include, but are not limited to, the matters listed under risk factors in the company's annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 25, 2024, as well as the company's subsequent filings with the SEC. Statements and information, including forward-looking statements, speak only to the date that they are provided unless an earlier date is indicated and TVIC does not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Now, let me hand over the call to Jennifer Ernst, TIVIC Health's Chief Executive Officer.
spk00: Hello, everyone, and thank you for joining us today. I'm Jennifer Ernst, CEO of TIVIC Health, and I'm joined today by our interim CFO, Kimberly Baumbach. So today, we will be taking a little bit different tactic as we go through our discussions. Of course, I'll be touching on our Q1 results, and Kim will go into those in much more detail. However, we've had some pretty important events the past few weeks, and that's what I want to spend more time discussing with you today. Specifically, I am focusing on the importance of the results we announced from our Vegas Nerve Stimulation Program. Results we announced last week coming out of the clinical study we conducted with the Feinstein Institute for Bioelectronic Medicine at Northwell Health. So, those of you that have been following TIVIC for a while know that we have one FDA-approved product in market, sold under the brand name ClearUp and used for the treatment of sinus pain and congestion. That product is based on a patented handheld bioelectronic design that targets the activity of the trigeminal and sympathetic nerves. Now, on that, we generated just over a million in revenue last year and 334,000 in Q1. Direct sales, of course, are representing our largest share. In Q1, we executed a limited exclusive distribution agreement with McKesson, one of the top 10 medical product distributors in the US. Through their affiliate, Simply Medical, McKesson will be serving as the exclusive distributor of ClearUp to major retail outlets, such as CVS, Walmart, Target, eBay, and other online brick and mortar retailers. They have already begun ordering, and I'm excited about the opportunity for this particular relationship as it begins to simplify our channel strategies. If you've been tracking us, you also know that we are continuing to improve the unit economics of that particular business line. That began last year with reducing cost of goods and restructuring our internal team. In Q1, we launched a new version of ClearUp. We addressed a technical issue in a chip that is part of our product's charging circuit. And as we roll out this new version, We are continuing to get our customer acquisition costs in line, and at this moment, working on restructuring our supply chain to better align to our short-term business requirements. We have also acknowledged for some time, though, that this one product was unlikely to be sufficient to support the expenses of a public company. And with that in mind, about two years ago, we began an investigation to leverage what we know about non-invasive bioelectronics into much higher value diseases, areas where we felt there could be a particularly strong return on investment. From that seed two years ago, I am thrilled with the results we were able to announce last week. We announced the successful completion of a pilot clinical study on a novel form of non-invasive vagus nerve stimulation. clinical trial was conducted with the Feinstein Institutes for medical research and represents a significant growth opportunity for the company. Not only did we announce the fact that it was successful, but the magnitude of the results we saw. We showed large, meaningful changes in the cardiac, neurologic, and autonomic functions via a non-invasive stimulation of the vagus nerve. Changes in in these functions that are equivalent to the state of the art in implanted devices. That's a big deal. Now, at this point, we don't believe the market has fully absorbed the import of what we announced and its potential for investors, which is why I'm going to spend a fair amount of time on it. To provide some background, let me start first with why we chose to focus on Vegas Nerve as the next candidate for products. The vagus nerve is a high, high-value target in medicine. It's the longest autonomic nerve in the body. It runs from the brainstem to the gut, and it touches every major organ in between. The vagus nerve is responsible for regulating functions from digestion and heart rate to breathing to inflammation and neurologic activity. And since the vagus nerve regulates so many organs and neurologic systems that are associated with chronic disease, modulating and changing the activity in this nerve pathway is of significant interest in medicine. Currently, overarching the vagus nerve stimulation market breaks into three major areas. First, most medically approved devices for vagus nerve stimulation, or VNS as it's called, are implanted. They are rigorously tested. They require FDA approval. and they command high premiums both in pricing and in market cap. Such implanted devices are already an established treatment method for epilepsy, for treatment-resistant depression, and more recently have been approved for stroke rehabilitation. BNS is also currently being investigated to treat inflammatory diseases such as rheumatoid arthritis and multiple sclerosis. Keep in mind, when I say implanted, Think of an electrical device that looks like a pacemaker, surgically implanted in the upper chest, and then wires are run up to and attached directly to a nerve in and around the neck area. And despite the fact it's a surgical implant, it's common to see response rates that run only around 50% for a surgically implanted device. That's why there is a significant opportunity an overwhelming need to develop safe and effective vagus nerve devices that can be applied noninvasively. Now, noninvasively is our key watchword. There's a second sector of VNS that has recently proliferated. These are the vagus nerve stimulators marketed as wellness, quote-unquote wellness devices. These are not regulated. They do not require clinical data, and they're sold almost exclusively for stress. Now, recently, device manufacturers have petitioned the FDA to provide stronger oversight of these devices, given that there are actually potential risks associated with unregulated, untested VNS. Finally, there are a couple notable companies in a third emerging category. This is the space we fit into, the place where medical-grade, non-invasive vagus nerve stimulation devices are coming to the forefront. Think of these as the evidence-based part of non-invasive VNS. ElectroCore, who many of you that are listening will know, sells the GammaCore device for migraines and cluster headache with FDA approval and the TruVaga version as a wellness product for stress. Spark Medical is a company that uses auricular vagus nerve stimulation. That means they administer it via the ear to support patients through opioid withdrawal. Okay. With those two, that leaves open a great deal of territory for effective non-invasive vagus nerve stimulation, particularly where we can generate targeted biological changes similar to the implanted devices and do so in areas where VNS has already been established as a treatment option. So with that as backdrop, starting in 2022, we conducted a full survey of the intellectual property landscape in this space. We identified holes and we began low-level experimentation on a novel method of non-invasive vagus nerve stimulation. This work is informed in part by some unpublished work of a key collaborator. Our results indicated we could potentially target and influence the activity of the vagus nerve with more precision than what has been thus far demonstrated in the field. That data became the foundation of our current collaboration with the Feinstein Institutes for Medical Research at Northwell Health. In 2023, we began a 20-person clinical trial in collaboration with the Zanos Lab at the Institute of Bioelectronic Medicine, part of the Feinstein Institutes. This team is arguably one of the world leaders in bioelectronic medicine, if not the world leader. And we are absolutely thrilled with the data that came out of this study. So a bit more about the study itself. Physiological measurements were taken before, during, and after NCVNS treatment to assess the impact of our treatment on the autonomic nervous system, on the cardiac function, and on brain activity. Compared to baseline, RVNS intervention resulted in a 97% increase in a measurement known as RMSSD. This is a measurement of heart rate variability, and this was in one 20-minute treatment. Clinically, higher RMSSD is associated with lower morbidity and lower mortality in cardiovascular disease. RMSSD is also widely accepted as a proxy for vagus nerve activity. Increasing parasympathetic activity has been shown to have potential in the treatment and prevention of cardiac arrhythmia, two areas of very high, very high value in cardiac disease. We also took measurements of brain activity using EEG, and the outcomes demonstrated that the TIVIC-VNS intervention increased frontal theta power by 24%, Frontal theta activity is associated with that calm, awake state, learning, memory. Increasing frontal theta power is expected to offer effective treatments for anxiety, for treatment-resistant depression, and for post-traumatic stress disorder. Again, some of the areas where we have already seen adoption of the implanted devices. Now, here's the big one. We saw reduced gamma power in multiple brain regions, a 66% reduction in frontal gamma power. That's the activity associated with reducing arousal anxiety. And we saw a 62% reduction in the temporal regions, which may have implications for reduction in epileptic activity. And finally, we measured autonomic nervous system activity during the NCVNS stimulation. subjects had a sustained pupil constriction of 9.5% in pupil diameter. This is an outcome that's associated closely with the activation of the parasympathetic nervous system. The evidence strongly supports that the changes in cardiac and neurologic data that we've seen are a direct result of engagement of the vagus nerve. In this case, accomplished in this study with a non-invasive device. The previous studies of non-invasive VNS have reported very mixed results regarding autonomic nervous system changes. In fact, we have found no prior studies that have shown the magnitude of these changes with a non-invasive device. We were able to show results non-invasively that parallel those that are reported for implanted VNS. I can't underscore strongly enough that these results are highly differentiated from other approaches for non-invasive VNS that we are aware of. Achieving these numbers in a healthy population is a very notable achievement. And we believe that this clinical program represents a significant new opportunity for creating shareholder value. Earlier this week, we also closed financing on a 4 million round shortly after the announcement. of the VNS program, which we intend to utilize as working capital, including moving forward on the next phase of the clinical work on the VNS program. So, with this as backdrop, I hope that I've been able to underscore how important this program and VNS is for the company in terms of creating new growth paths and new growth opportunities above and beyond the current product line. And now I'd let me hand it over to Kim to go over this quarter's financial results and the details associated with the financing.
spk01: Thanks, Jennifer, and good afternoon, everyone. I am pleased to report the first quarter 2024 financial results. We posted first quarter revenue of $334,000, a decrease of $42,000, or 11.2% compared to the same quarter last year, primarily due to a price point increase of our single commercial product, ClearUp. This resulted in a 35% decrease in unit sales offset by a corresponding increase in the per unit average sale price. We expect some continued variability in clear up sales due to the reduction in marketing spend and price point positioning for target markets with a net impact resulting in a higher gross profit and lower loss from operations. For the three months ended March 31st, Cost of sales decreased by 96,000, or 37%, compared to the same quarter last year, primarily driven by the decrease in sales volume. Gross profit for the first quarter was 167,000, an increase of 54,000, or 48%, compared to 113,000 in the same quarter last year. The improvement, again, primarily due to the clear-up price increase and the lower cost per unit. Total operating expenses were $1.6 million for the first quarter 2024 compared to $2.2 million in the same quarter last year. The decrease of $581,000 or 26% is attributed to a first quarter 2023 one-time segmentation study for clear up as well as lower staff consulting professional fees and other reduced general administrative expenses. As a result, our first quarter net loss was 1.5 million compared to 2.1 million in the same quarter last year. On May 13th, 2024, we sold an aggregate of 4,710,000 shares of our common stock together with the Series A warrants of 4,710,000 and Series B warrants of 7,065,000 to certain investors at a public offering price of 85 cents per share. This offering resulted in aggregate gross proceeds to the company of $4 million. Aggregate net proceeds to the company after deducting placement agent fees and offering expenses was approximately $3.5 million. Maxim Group served as the placement agent for the offering. The securities issued in connection with the offering were registered pursuant to the registration statement, which was initially filed with the Commission on March 29, 2024, in which the Commission declared effective as amended on May 9, 2024. As of May 14, 2024, including proceeds from the offering, the company had approximately $4.7 million of cash and cash equivalents, and we continue to maintain a no-debt balance sheet. I will now hand the call back to Jennifer for ending remarks.
spk00: Thanks, Kim, for taking us through all of the details, particularly of the financing section. 2023, as I look back, this has been the time of resetting, rebuilding, and recovery. 2024, now that we can finally begin talking with you about the exciting work that we are doing and the new possibilities for bioelectronic medicine based on our VNS work, this is an exciting year. So, yes, we've got a commitment to fiscal responsibility. We remain focused on decreasing our expenses, optimizing our operations for efficiency, We've revamped the administrative cost structure of the business. We continue to reduce the overhead expenses and continue to hone and focus the marketing strategy. Our most important investments, though, at this time are likely to be the investments we make in furthering the VNS program to continue to deliver on a new set, a new initiative of milestones and potential value inflection points. As we have done in the past, We continue to evaluate business combinations, licensing opportunities, other types of strategic transactions that may help enrich our product portfolio with complementary offerings. We also recognize, though, that they must be the right opportunities at the right time. Market conditions have to be conducive to being able to close and manage those opportunities. So we remain vigilant. in assessing the opportunities that may disproportionately benefit our shareholders while we continue to make a concurrent investment in the internal and organic development of our own technology. Our research pipeline is beginning to become an even more important part of our strategy to build shareholder value. We believe, I believe, that the VNS opportunity, as well as the medical extensions of our trigeminal nerve stimulation platform that are currently in trial, have the potential to be of great significance to the company and to our shareholders. VNS is a growing market segment. It's part of an 8.3 billion neurostimulation market. And we at Tyvek, along with collaborators such as the Feinstein Institute for Bioelectronic Medicine, hope to lead the way to meaningful improvements in how VNS devices can precisely target and modulate the vagus nerve activity We're seeking to achieve these intended biological and clinical outcomes with non-invasive or perhaps maybe minimally invasive, but with non-invasive devices. And with that, I want to thank you for taking the time with us today. I hope you have heard now a vision that unlocks new potential for the company, and I look forward to speaking with you as we make progress through the year and continue to report out on both our financial and research progress.
spk02: Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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